The Telecom Revolution: At What Price?

PRESIDENT Clinton and Congress are now locked in a standoff over legislation that could change the lives of almost all Americans, from the moment they wake in the morning to their clock radios to when they switch off their television sets at night.

Supporters claim the Telecommunications Act of 1995 will open up virtually all of the communications industry to freewheeling competition, creating a rush of sophisticated new technologies that will transform the American home and workplace and, eventually, lower telephone and cable rates.

"The American people will be amazed by the wide array of technological changes that will soon be available in their homes," says Rep. John Linder (R) of Georgia.

Critics counter that the Republican-backed legislation will leave consumers captive to huge media monopolies with a stranglehold on information and entertainment. They believe it will diminish the quality and choice of what comes over the airwaves, limit political debate, and raise telephone and cable rates almost immediately.

"One person owning the majority of media outlets in a community is a threat to the very system of democracy upon which our society is built," said Vice President Al Gore when he reiterated President Clinton's threat to veto the bill, which was passed overwhelmingly by the House after a truncated and bitter debate on Friday. A slightly different version passed the Senate last June.

The House bill sweeps away most barriers among the telephone, cable, and television industries and allows them to get into one another's business. It also lifts most of the regulations that now control costs, limit ownership, and require a commitment to public service, in the belief that competition will ultimately serve consumers best. To supporters, it's a free marketer's dream. To critics, it's a corporate giveaway.

"This dismantles decades of safeguards," says Jeffrey Chester of the Center for Media Education, a research group based in Washington. "[House Speaker Newt] Gingrich is so ideologically blinded by the need for a free market that the legislation he's created harms the democratic ideals he says he believes in."

No one disputes the need for telecommunication reform. Technological advances have far outstripped the nation's current law, passed in 1934. The development of digital electronics, fiber optics, and the advent of the internet have made it possible to revolutionize the American home. With the right equipment, you can receive television signals through the phone lines, talk on the phone via cable, hook your computers into both, and down load a video, or send reactions to objectionable shows.

But there's great uncertainty about how these technologies will fare in the marketplace and when they'll find their way into the average American's home.

"What we're witnessing is an electronic land grab to dominate the future of this trillion-dollar industry and future of the country in the 21st century," says Mr. Chester. "We're talking about who will control the institutions that dominate American culture."

The lobbying effort has been intense, with spending by all the players estimated in the tens of millions of dollars.

"What we're seeing is a battle of the titan campaign financiers in the communication fields. Consumers aren't even in the game because they don't have any money to give," says Ellen Miller of the Center for Responsive Politics, a nonprofit research center in Washington, which tracked the more that $5 million given directly to members of Congress by the communications industry.

Republicans insist their belief in an unfettered free market, not the lobbyists largess, is responsible for the legislation. Among other things, it would deregulate all but basic cable service and allow phone companies to begin offering cable television services. The competition between the two is supposed to create lower prices, although even supporters admit that it could take 10 years for the phone companies to build the fiber-optic infrastructure they'll need to compete. Critics charge that gives cable companies 10 years to gouge customers.

"We have to remember what happened after Congress deregulated cable in the 1980s," says James Love of the Center for the Study of Responsive Law, a Washington-based research center. "Cable costs jumped three times the rate of inflation and service was awful."

Analysts estimate consumers were overcharged more than $6 billion. Public outrage prompted Congress to reregulate the industry with the Cable Act of1992.

Since then, the Federal Communications Commission (FCC) has successfully brought down rates around the country. Just last week, it announced a settlement with Time Warner Cable and Continental Cable that provided more than $5 million in refunds to customers, lowered basic rates, and capped the price on satellite services.

The House bill also sets the stage for more media mergers like the mega-deals announced between Disney and ABC and Westinghouse and CBS last week. It would lift restrictions on the number of television stations one company could own and increase the percentage of the national population that each company could reach from 25 percent to 35 percent. It would also do away with the restrictions which forbid one company from owning a television and newspaper in the same area and would allow a single company an unlimited number of radio stations.

"We're talking about allowing unprecedented control over a community's media resources potentially being put into the hands of one person or company," says Chester. "So if you're a citizen or a community group and there's an issue you're concerned about that doesn't sit well with the owner, you may well find yourself ignored by the local newspaper, radio, and television stations."

Others are worried local flavor will disappear from radio and television stations as large media conglomerates gobble them up. Nationally syndicated programming is much cheaper and easier to produce, whether it be in radio or on TV.

The House bill will also allow local telephone companies to compete with long-distance companies and vice versa. The bill's supporters admit that the expected confusion and rate hikes that followed the breakup of ATT will look minor by comparison. But they insist, in the long run, it will lead to greater competition and lower prices.

The Price of Telecom Revolution

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